Changes to Remuneration for Real Estate Agents

Traditionally, the restriction had been a fixed amount or a percentage of the purchase price.

In 2005, the percentage was amended to be a downward sliding percentage, if it were not a fixed percentage.

No combinations were allowed, just one or the other!

There was no real reason for this. Basically, it was kind of a “silly arrangement”.

Now, the expectation may very well be: reimbursement of some fixed basic costs, no matter what plus a percentage on a contingency basis.

That’s what happens now in the legal business. If the matter is undertaken with a contingency fee, the client pays for the disbursements and possibly some other costs, “win, lose, or draw”. But, in the real estate business, everyone seemed to expect the agents to always work for free, and only get paid on the completed deals.

Here’s the new section 36 to the Real Estate and Business Brokers Act, 2002:

s. 36 Commission and remuneration

(1) All commission or other remuneration payable to a brokerage in respect of a trade in real estate shall be an agreed amount or percentage of the sale price or rental price, as the case may be, or a combination of both.

If no agreement

(1.1) If there is no agreement as to the amount of the commission or other remuneration, the rate of it or other basis for determining it shall be that generally prevailing in the community where the real estate is located.

You probably should also have a look at the existing s. 36:

"Commission and remuneration, scale

36. (1) All commission or other remuneration payable to a brokerage in respect of a trade in real estate shall be either an agreed amount or percentage of the sale price or rental price, as the case may be, but not both and, if there is no agreement as to the amount of the commission, the rate of commission or other remuneration or other basis or amount of remuneration shall be that generally prevailing in the community where the real estate is located.

Same

(2) If the commission payable in respect of a trade in real estate is expressed as a percentage of the sale price or rental price, the percentage does not have to be fixed but may be expressed as a series of percentages that decrease at specified amounts as the sale price or rental price increases.

Same

(3) No registrant shall request or enter into an arrangement for the payment of a commission or any other remuneration based on the difference between the price at which real estate is listed for sale or rental and the actual sale price or rental price, as the case may be, of the real estate, nor is a registrant entitled to retain any commission or other remuneration computed upon any such basis."

So, 36 (2) and 36 (3) are remaining intact. That means downward sliding percentages only (if not a fixed percentage) and no “difference in price” deals.

If you were to consider the economics of it, upward percentages would be very attractive to the consumer and would likely work well in the marketplace. In any event, no changes there yet.

The Ministry of Consumer Services has proposed changes to the Real Estate and Business Brokers Act, 2002, which has successfully completed first reading on 18 April 2013.

Be ready to take advantage of the changes once the legislation is in place.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300. www.iSourceRealEstate.com